Tradeoffs between forests and farming in the Legal Amazon Region of Brazil

Deforestation has been a topic of debate in climate change discussions due to its effect on CO2 emissions. The Amazon Forest, the biggest tropical forest in the world, is located along the north of Brazil. There, expansion of soy and corn production has pushed the production of livestock and other crops toward the Amazon forest, which involves a tradeoff between the area in forests versus these activities. We estimated the tradeoff between agriculture and forest for the 771 municipalities of the Amazon region by finding the production possibility frontier, using Data Envelopment Analysis. This tradeoff was estimated based on directional output distance functions. We found that, on average, 58% of observable total revenue from livestock, grains and timber production would be foregone to decrease deforestation in 2006 by 93%. We also estimated determinants of efficiency differences across states, which suggested that environmental efficiency was enhanced in municipalities with higher development indexes.